This article discusses the impact of agreements and letters which NHAI (Authority) requires its Concessionaire's to sign in order to waive off any damages as per Clause 4.2 and 4.3 of the Model Concession Agreements. It is a general practice of the Authority to seek a letter of waiver from the Concessionaire for not claiming any damages due to the default of the Authority. The Authority is able to obtain such letters because it is in a strong position to do so. Where the Concessionaire refuses to issue such a letter, the Authority uses arm twisting tactics such as withholding the funds of the Concessionaire, blacklisting the Concessionaire prohibiting them to enter into any future projects.

Such actions give rise to various legal questions like (I) Whether the NHAI is an enterprise and can it abuse its dominant position under the Competition Act; (II) Whether the NHAI is performing a sovereign function out of the purview of the Competition Act and (III) Whether the contractual rights of any party can be waived by a letter given by any party.

WE ATTEMPT TO ANSWER THE AFOREMENTIONED QUESTIONS

1. The National Highways Authority of India (hereinafter, the NHAI) is the statutory and government authority for development, maintenance and management of national highways and for matters connected therewith or incidental thereto.

2. The Competition Act, 2002, is an Act inter alia to promote and sustain competition in markets, protect the interests of consumers and to ensure freedom of trade carried on by other participants in Indian markets. It is essential to understand that Section 2(h) of the said Act while defining an 'enterprise' also says that any enterprise discharging any activity of the Government relatable to the sovereign functions is not an enterprise. Further,

Section 4 provides that no enterprise shall abuse its dominant position. It also provides for cases when there is an abuse of dominant position. Inter alia, making "conclusion of contracts subject to acceptance by other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts" is an abuse of dominant position. Accordingly, as NHAI falls under the definition of 'enterprise' for the purposes of the Competition Act, 2002, it can indulge in dominant behavior under the Competition Act provided it imposes conditions which are discriminatory and are being imposed due to its strength in the market. The same becomes clearer in the case of Madhya Pradesh Power Generating Company Limited v. South Eastern Coalfields Ltd.1 , where the enterprise was Coal India Limited and its subsidiaries. It was held by the Competition Appellant Tribunal as under:

"45. The Commission notes that the very insistence by CIL and its subsidiaries upon consumers for executing MoUs in addition to contractual arrangements agreed between the parties by way of FSAs, was subversive of contractual obligations and was a clear indication of abuse of market power by State monopoly. As shown above, the only purpose of MoUs was to dilute the contractual obligations of the seller and to bail them out from legal commitments.

The terms and conditions of MoUs were ex facie disposed favorably towards the coal companies and the consumers had no option except appending signatures thereon. No justification for restriction in the indigenous coal in MoUs by the coal companies can be gathered. The impugned conduct appears to be unfair being in contravention of the provisions of Section 4(2) (a)(i) of the Act......

CONCLUSION

56. In view of the above discussion, the Commission is of considered opinion that CIL through its subsidiaries operates independently of the market forces and enjoys dominance in the relevant market of sale of non-coking coal to the thermal power producers and sponge iron manufacturers in India. The Commission hence, holds the Opposite Parties to be in contravention of the provisions of Section 4(2)(a)(i) of the Act for imposing unfair/ discriminatory conditions through FSA's and indulging in unfair/discriminatory conduct in the matter of supply of non-coking coal, as detailed in the order....."

3. With the aforesaid provisions of the Competition Act, 2002, and the observations of the Tribunal, it becomes abundantly clear that the NHAI is exploiting its dominant position by imposing non-commercial conditions upon the contractors due to its strong market position. With these observations the question (I) is answered in the affirmative.

4. As read under Section 2(h), the Competition Act, 2002, excludes all the activities of the government relatable to the Sovereign Functions of the government including all activities carried on by the departments of the central government dealing with atomic energy, currency, defense and space. Unless an entity can be classified as an "enterprise" under the Competition Act, its provisions shall not apply to such entities. Now, the question to be addressed is whether the NHAI could be said to be engaged in sovereign functions to exclude it from the definition of "enterprise"?

5. The Supreme Court of India has discussed in various judgments at length that functions of the State which are primary, inalienable, and nondelegable can be termed as sovereign functions.

In Bangalore Water Supply & Sewerage Board v. A. Rajappa2</em> , the Supreme Court, while expounding the dominant nature test, stated that welfare activities or economic adventures undertaken by the government or statutory bodies are not exempted from the application of industrial law under the garb of sovereign functions. Further, in Agricultural Produce Market Committee v. Ashok Harikuni3, the Hon'ble Court held that the dichotomy between sovereign and non-sovereign functions could be determined by finding which of the functions of the state could be undertaken by any private person or body. In a given case, even in subject on which the state has the monopoly may also be non-sovereign in nature. Mere dealing in subject of monopoly of the state would not make any such enterprise sovereign in nature. Further, in Ideal Road Builders Pvt. Ltd. V. Commissioner of Service Tax, Mumbai (CESTAT Mumbai) it was held that NHAI is only a statutory authority and not a constitutional authority. Therefore, the functions undertaken by such authority cannot be sovereign in nature.

6. Therefore, in such cases, though NHAI is working as a monopolist in the market, its functions cannot be termed as state functions because they are not constitutional functions but commercial in nature; thus, are alienable in nature and can be delegated. The concession agreement in itself depicts the fact that the functions of the NHAI are delegable in nature. Therefore, it cannot claim exemption from the application of the Competition Act, 2002. In view of the above the question (II) is answered in the negative.

7. Before we attempt to answer question (III) it is essential to understand the concept of waiver and its origin. The words waiver, estoppel and acquiesce are used in all such circumstances where a party loses its remedy to enforce a right which ought to have been enforceable in absence of such waiver or estoppel. The House of Lords in Motor Oil (Hellas) Corinth Refineries S.A. v. Shipping Corp. of India4, generally known as the Kanchenjunga Case has held that "waiver" may refer to a forbearance from exercising a right or to an abandonment of a right arises by virtue of a party making an election. An election may arise in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so. His decision, being a matter of choice for him, is called in law an election. In All India Power Engineering Federation and Ors v. Sasan Power Limited and Ors.5 the Court held that "waiver is an intentional relinquishment of a known right, and that, therefore, unless there is a clear intention to relinquish a right that is fully known to a party, a party cannot be said to waive it."

8. The aforesaid cases have made clear two things in prerequisite of a waiver - Firstly, an existence of a known enforceable contractual/ statutory right; and secondly, waiver of that right and it shall be done voluntarily. In cases, the letters which are submitted by the concessionaire under arm twisting methods of the NHAI (such as withholding the funds of the concessionaire, blacklisting the concessionaire prohibiting them to enter into any future projects) the said "waiver" cannot be said to be voluntary or intentional waiver of its right to claim damages for default of NHAI. The same is only assented to under the pressure of NHAI to prevent itself from becoming insolvent or getting involved in several arbitrations/ litigations.

9. In view of the above, it cannot be said that the concessionaire has waived its right to enforce the claim of damages, because express terms of the contract cannot be waived by merely a letter which has been written under coercion and / or threats of NHAI; and as the NHAI is performing public duty, any delay caused in the projects is nothing but a loss to the public at large. Therefore, in view of the finding of the Hon'ble Supreme Court in All India Power Engineering Federation and Ors v. Sasan Power Limited and Ors. (Supra), waiver cannot be claimed if public interest is involved. In the light of the aforesaid, the question (III) is answered in the negative.

Footnotes

1 2017 SCC Online CCI 28

2 (1978) 2 SCC 213

3 (2000) 8 SCC 61

4 (1990) 108 N.R. 280 (HL) para 14, 15

5 (2017) 1 SCC 487

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